Solving…Not Buying

A radical new approach to city purchasing finds the city asking vendors for problem-solving ideas—instead of calling for bids

In an announcement earlier this month, the Mayor’s office unveiled its plan for a reverse bidding procurement process—essentially letting anyone who wants city business to see how their bid ranks, price-wise, and continuously lower their offer until the deadline. Mayor Kenney’s Chief Administrative Officer Rebecca Rhynhart says reverse bidding, which has been implemented in Los Angeles and Chicago, has the potential to bring contract costs down between 5 and 15 percent, saving the city millions of dollars a year—money that Kenney says can be used to help fund universal pre-K.

It was an encouraging—if wonky—sign of progress in City Hall that nods to what the Mayor promised in his inauguration: Streamlining city services so they work better. It also tackles what has become an international movement to change the way governments buy things. President Obama has mentioned it, in reference to the disastrous rollout of the healthcare signup system its first year, and procurement reform is one of the key issues for Code for America, the civic hacking organization that particularly focuses on technology-related RFPs.

But it’s what Rhynhart didn’t mention at her press conference that is the truly inspirational—and table turning—idea now wending its way through city government. Late last year, Philadelphia became one of a handful of American cities chosen to work with Citymart, an international organization with one goal: Radically changing the way cities work with companies to solve civic problems.

“Cities are filled with capable people doing their jobs, but no one can know everything,” says Julia Haselmayer, a principal at Citymart. “This puts the problem statement in the center: Cities say what they want to solve, instead of what they want to buy.”

This is the old way of doing things: City departments identify a problem—how to limit the amount of stormwater that goes to the waterways, for example—and then a solution, such as water permeable playground blacktop. Then they post and send out a Request For Proposal (RFP) to vendors to bid on that project. With Citymart, departments identify a problem, but stop short of coming up with the fix. Instead, they issue a clearly-written explanation of the problem, and call for solutions from vendors.

“Cities are filled with capable people doing their jobs, but no one can know everything,” says Julia Haselmayer, a principal at Citymart. “This puts the problem statement in the center: Cities say what they want to solve, instead of what they want to buy.”

Citymart, started by Haselmayer’s husband, Sascha, an architect-turned-civic thinker, has helped 60 cities issue over 100 challenges in the last five years, including London, Paris, Seville, Madrid and Sheffield. Their most ambitious effort was in Barcelona, where Citymart helped six city departments issue challenges that needed to be addressed, including reducing bike thefts and digitizing museum archives. Their call for solutions was intentionally widespread, to broaden the pool of vendors, big and small, who work with the city, and their call to action reached far into the community—on social media, and even advertisements on the city’s subway system.

Barcelona’s procurement website, usually visited 20 times when an RFP goes out, got 55,000 views in the first three weeks. And rather than the same five vendors bidding on projects, 119 companies from around the world submitted solutions to the six problems. What’s more, the city departments said the quality of the bids was higher than usual, and the ensuing contracts cost 30 percent less than they’d budgeted. Haselmayer says the key here is not just ideas, but actual solutions that have been proven in some way—bike shares, for instance, which no longer seem new in places like Philadelphia, but which are out-of-the-box ideas for other cities around the world.

“This is not about reinventing the wheel, which is very costly,” Haselmayer says. “These are real existing solutions, from providers who have done this. But it opens up the process to more of them, and to more ways of approaching a problem.”

In Philadelphia, the idea of solutions-based procurement is not wholly untried. Under Mayor Nutter’s Office of New Urban Mechanics (whose mission was to “improve radically the quality of city services”), the city launched FastFWD, a problem-solving civic accelerator that targeted startups with new approaches to old issues. With a $1 million grant from Bloomberg Philanthropies, FastFWD in 2013 issued its first set of problems, around public safety. Of the 82 applicants who responded, 10 were awarded $10,000 and enrolled in a 12-week accelerator program run by GoodCompany Ventures, a nonprofit that helps to launch socially-minded startups.

Rather than the same five vendors bidding on projects in Barcelona, 119 companies from around the world submitted solutions to the six problems. What’s more, the city departments said the quality of the bids was higher than usual, and the ensuing contracts cost 30 percent less than they’d budgeted.

Two of those companies were eventually awarded $30,000 city contracts—Textizen, a text-based reminder system for the formerly incarcerated; and Chicago-based Edovo, which creates tablet-based education platforms for prisons. Both companies, who honed their unique solutions during the accelerator, have since re-upped their contracts with the city. The second round of FastFWD—in which four companies are negotiating city contracts—is coming to a close in the next few months.

That experiment paved the way for Citymart, which chose Philadelphia to be among its first few American clients, including New York, Miami and Long Beach, California. Funded by a Knight Foundation grant, Citymart this year is working with Philly’s Office of Innovation Management to reach out to city departments, train workers on how to rethink the way they approach problems, sift through potential challenges, and then write an RFP in a way that is clear and as simple as possible—the best way to ensure the broadest participation. (Citymart’s original partner, the Office of New Urban Mechanics, has been absorbed the Department of Innovation Management, run by Andrew Buss. It falls under Rhynhart’s administrative purview.)

In total, Citymart will work with Philly to present five problems to the community and select a vendor with the best solutions. Their first problem, in December, came from the Streets Department, which is about to embark on a street safety campaign. The city posted an RFP for the first phase, to help the department understand what Philadelphians already know about pedestrian and traffic safety. Buss says eight companies, more than usual, responded to the challenge in a few weeks; the contract was awarded to Temple University’s Institute for Survey Research. The second problem, how to manage excessive stormwater, will be posted on the city’s Big IdeasPHL website in the next few weeks. Buss has put out a call to other city departments to propose ideas for the remaining three challenges.

The goal for this year is training city staff to think differently about how they buy services, so that after the Citymart pilot, departments will use solutions-based procurement in as many instances as possible. “We’re saying, ‘You have this idea, let’s frame it in a different way that’s open-ended and can attract more people to the table,’” Buss says. “We’re growing a network of people in the city who are able to work that way so we can do this on our own after Citymart leaves.”

To be clear, Citymart-style procurement does not work for every type of city purchase. Sometimes, city departments just need paper, or an overpass just needs fixing, or a bond measure just needs an audit. Hasalmeyer herself says Citymart’s goal is for 10 percent of city services to go through a solutions-based procurement process. It’s too soon to know how far Philly will take this notion, but Rhynhart says she anticipates solutions-based procurement will be a part of the new way Philadelphia does business, from its reverse bidding auction, to a new e-procurement system set to launch in 2016 to replace the current (antiquated) method of bidding on projects—with paper proposals.

“Citymart is teaching the city to look at procurement in a different way,” she says. “A lot of the issues the city faces could be solved this way. And it would bring community and businesses closer to the city to help solve its problems. That’s a huge opportunity.”

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